Uber and Lyft have generated billions in gross revenue in California. It’s a dazzling data point that has caught the eyes of some politicians who are unable to resist the covetous urges that arise when they watch commercial enterprises thrive.
Elected officials regard Uber, Lyft, and other ridesharing companies — as well as all other innovative businesses and industries that generate significant revenue seemingly out of nowhere — the same way a hungry wolf watches a lamb. Where consumers see convenience, and investors envision opportunity, politicians picture a fresh font of government revenue. Too rare is the elected official who will sit by and let dollars change hands in lawful, private transactions without lusting for a cut. Too many operate like Don Fanucci in “Godfather II.” They want to wet their beaks.
It’s this access to easy money that’s driving a proposal in Oakland to place a measure on the ballot that will let voters decide if the city will tax ridesharing. It would be the first city in California to levy such a tax, even though both Uber and Lyft are headquartered in the Golden State. The revenue it generates will supposedly be dedicated to street repairs, though anyone who’s been paying attention knows that more than just a little slice of it will be spent on public transit, the mode of transportation that politicians are continually trying to herd the masses into.
Across the Bay, the San Francisco Board of Supervisors is asking Sacramento to pass a state law that will give the city the authority to levy infrastructure impact fees on ridesharing companies. Supporters argue that the city needs to keep up with other large municipalities across the country that are squeezing ridesharing companies for money that is allegedly dedicated to infrastructure maintenance.
“San Francisco and the state of California are far behind the times,” Supervisor Aaron Peskin told the board earlier this month. “Here in California, we are going the reverse direction.”
Actually, it’s Peskin who has it backward. Assessing taxes on everything that moves, to borrow part of a famous line from a former California governor, is “going the reverse direction.” Levying taxes is not an enlightened policy that moves a society ahead but an ancient method of wealth extraction and a proven means of increasing government’s size and grasp.
While taxation in general is a heavy burden on established businesses, targeted taxation is especially brutal on emerging businesses and industries. “Innovation,” Austrian economist Joseph Schumpeter has said, “is at the heart of economic progress.” That’s why the proposals in Oakland and San Francisco are so alarming. As soon as one of these cities acquires the power to add a tax unique to ridesharing, cities and counties across the state will follow. They, too, will wet their beaks at the expense of innovators, consumers, and the overall economy.
Economist John Tamny of Forbes and RealClearMarkets says that rather than punish ridesharing companies with additional taxes, policymakers should instead express their gratitude toward them.
“An inconvenient truth for the political class is that nine out of 10 Silicon Valley startups fails,” he tells us. “When we tax this source of immense innovation we’re increasing the odds of their failure rates increasing alongside a decrease in the economic vibrancy that they bring.”
This is not a truth too difficult to understand. Yet our political class in California seems unable to grasp it.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.